Prominent hedge fund manager Bill Ackman has recently disclosed he is making significant bets on tech giants Meta and Amazon.com Inc (NASDAQ: AMZN), describing both as high-quality investments with long-term compound growth potential.
Ackman stated that these industry leaders possess stable, predictable cash flows and robust resilience, making them suitable as core holdings for a highly concentrated, long-term investment portfolio.
His Pershing Square fund focuses on a select few companies with dominant industry positions, firms capable of withstanding the tests of time and market volatility.
In a recent interview, Ackman noted that his portfolio is known for its high concentration, typically holding only 12 to 15 positions at a time. He avoids chasing trendy artificial intelligence startups and does not rely on speculative options trading for quick profits. His entire investment strategy revolves around predictable earnings and the long-term growth potential of businesses.
Ackman explained, "Our investment approach is to identify what we believe are the highest quality businesses in the world, those that can stand the test of time."
He said Pershing Square targets companies expected to deliver high compound returns over the next three to five years. By deliberately avoiding what he calls fashionable, hot trends, his fund's holdings consist entirely of what he describes as "extremely high-quality, long-term compound growth" companies.
Reasons for the Attractive Valuations
Ackman believes that despite the massive market capitalizations of these two companies, their current share prices are highly attractive when considered alongside their unassailable market positions.
For years, Ackman has been favorable towards companies like Meta, Amazon.com, and Microsoft but remained on the sidelines due to their historically high valuations. Recently, however, this investment calculus has shifted in his favor.
Ackman stated, "If Microsoft, Amazon, and Meta are all cheap stocks, and we believe they are, then you could argue the overall market is not expensive."
Discussing Amazon specifically, Ackman highlighted the e-commerce giant's deep integration into consumers' daily lives, pointing to its near-monopoly on fast delivery. He said, "Whenever I hear about a new book, I go to Amazon to order it." He contrasted this with the poor in-store shopping experience at physical retailers in New York City during the pandemic.
"With Amazon, you get delivery in two hours. Who can compete with that? So you look for these dominant, high-quality businesses with very low odds of competition," he added.
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